Monday, April 14, 2014

Here's Why SodaStream Just Bubbled Up 8%

Shares of at-home carbonation specialist SodaStream (NASDAQ: SODA ) closed up by more than 8% Monday after analyst David Kaplan of Barclays raised the firm's price target on the stock to $100 per share.

For those of you keeping track, that's nearly 82% higher than Barclays' previous target of $55, and it also represents a 45% premium to Monday's closing price at just above $69 per share. All told, shares of SodaStream are up almost 28% over the past month and 54% year to date in 2013.

So why all the optimism?

Kaplan believes that "conservative estimates for 20 percent top line growth are not priced in." More specifically, he thinks SodaStream's sales will have increased 28% when all is said and done this year, followed by another 20% increase in revenue for 2014. He also says that as a result, earnings per share should come in around $2.55 this year and $3.28 in 2014.

Break out the bubbly!Of course, investors have every reason to believe him; less than three weeks ago, SodaStream management outlined a perfectly reasonable plan to achieve sales of at least $1 billion by 2016. In fact, that announcement was enough to quickly prompt upgrades from analysts at both Oppenheimer and Citigroup, who both currently hold more conservative price targets of $68 and $66 per share, respectively.

What's more, less than four weeks ago, the Israel-based company maintained its habit of crushing analysts' estimates by turning in solid first-quarter earnings results. To be sure, it's hard not to be impressed with SodaStream's first-quarter year-over-year revenue growth of 34% to $117.6 million. In addition, adjusted earnings per share managed to increase 24% to $0.68.

Better yet, the company's razor-and-blade model is paying off, as carbonator refill revenue increased 101% and syrup sales rose 119% from the first quarter of 2012. Finally, soda-maker sales showed no signs of letting up after growing 78% from the same year-ago period, and the massive United States market should soon become SodaStream's largest.

A better optionFinally, despite the fact that some folks might frown upon SodaStream's perceived unhealthy target market, I remain convinced this company really does want to make our lives better.

After all, while SodaStream offers a variety of flavor options, many of its customers aren't particularly worried about calories as they take advantage of the system's ability to make sparkling water at home for an average of just 25 cents per liter. Better yet, SodaStream machines cut down the number of plastic bottles otherwise required to distribute traditional soda, and each refillable SodaStream carbonation canister can make between 60 and 110 liters, saving the equivalent of 170 to 310 aluminum cans.

In addition, according to SodaStream, an average can's worth of their soda costs just 25 cents, and a single 8-ounce serving of SodaStream Cola contains just 35 calories, 8 grams of carbs, 8 grams of sugar, and only 10 milligrams of sodium.

When you compare that with the cola offerings of beverage behemoths Coca-Cola (NYSE: KO ) and PepsiCo (NYSE: PEP ) -- 8-ounce servings of which each have 100 calories, over three times the amount of carbs and sugar, and between 2.5 and 3.5 times the sodium -- it's easy to see why SodaStream hasn't been shy about calling out both Coke and Pepsi in its advertisements.

Foolish final thoughtsAs a relatively small $1.4 billion company, SodaStream still can't come close to matching the marketing clout or incredible global reach of both Pepsi and Coke, so it's safe to say the soft-drink giants won't be going anywhere anytime soon.

However, it's also easy to see why the value SodaStream brings to the table is finally resonating with consumers, and it's obvious this small company is gaining traction quickly. In the end, I see no reason SodaStream can't continue its meteoric rise over the long haul while rewarding investors handsomely in the process.

Want to dig even deeper?SodaStream's carbonation technology sounds simple, but the company offers an intriguing opportunity for growth that could very well disrupt the soda industry. The Motley Fool's premium report on SodaStream explains the opportunities as well as the risks in the company. The report comes with a year's worth of updates, so just click here to get started.